WSJ's John McKinnon has details on 'pass-through' companies, or firms that pass along profits to investors who then pay taxes through their individual tax returns. AP Photo/Mary Altaffer, file

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on ... the ... yet inching piece that don't take the weekend when ELP U S corporations ... nearly seventy percent of them are reduced at nine a taxable this is the huge stock is up from less than a quarter ... and in nineteen eighty ... John good morning I these figures are pretty baby ... and I was pretty surprise read to corporate taxes that this finally announced one percent of GDP ... yet this is one of those stories this I'd be really slow moving but it's really upbeat story an IP catches a lot of people by surprise basically what we're saying is that ... you know the vast majority of U S business is essentially ... don't have to pay any tax their work a nice as were called Pastor's meaning that ... there's no tax paid by the enterprise instead the taxes paid by the owners of the enterprise ... and John that's just ... these figures suggest ... baffling how how does one ... construct themselves such that they completely you know ... oh boy the the the tax exposure I I I think ... anybody seen the statistics want to cut a better day ... one of the money that the Arsenal at ... the piano and several million business owners have had that same idea ... in basically you know lawmakers beginning with Congress in the fifties and state legislatures and up ... please give eighties and nineties that ... you know I've ... I've ... it's given in to the wishes of business owners who want to be able to organize essentially as partnerships ... said that they don't have to ... pay tax ... while they still hinge always ... on all the benefits of being a corporation such as limited liability ... to sleep when out of this Maxim make it harder ... for corporations to fight first ... a tax overhaul bringing down at thirty five percent U S corporate tax rate that is among the highest ... animation precisely because ... their influence is there's fewer than now so many businesses have other structures or other tax incentives that they want to protect ... their focus elsewhere ... right it's yet another problem it's ... not facing the old line U S corporations that are still taxable ... basically they've been playing by the rules the whole time ... and now they want the rules to change but meanwhile you know most businesses that have started up ... critically in the last twenty five years ... I have organized another way so that they don't really have a dog in the Friday when it comes to the thirty five percent corporate ... tax rate in the last ... of the explanation she really Private Equity ceasing but a couple of firms Blackstone KKR ... it uses structured to avoid paying taxes ... you didn't mention Bain Capital their unassuming even though there also private equity business of course raises question because of Mitt Romney's time there ... things are not publicly traded they were able to take the same advantage of the tax code ... yet I'm kind of ... you know not the expert on Cain's situation but aam ... there is a special set of rules for publicly traded ... on to pass through entities essentially publicly traded partnerships ... and the growing number of private equity firms are finding a way to organize so that they can take advantage of ... the pass through tax rules I even have to pay tax ... and also the publicly traded which is sort of the best of all worlds best of all possible worlds ... and John are these ... effectively loopholes that are being exploited ... or is this the intent of of of the way the tax code has been ... great ... it's kind of both aam ... as imagined earlier Congress beginning in the fifties open the door for small some small businesses to be organized this way ... those rules have been loosened said that larger and larger businesses can be organized that way ... the state legislatures did the same thing starting with small businesses and now some of those are very large ... and Congress also as an engine ... created the seemingly narrow ... exceptions to allow companies to have the best of all worlds ... I he passed re taxation and ... no public ... public trading access to public markets ... so we know so it is very clearly just the policy that's been established by lawmakers that so that is Khona loopholes to